If investors are uncertain that a corporate bond issuer will make all of the bond payments as promised, the investors will demand a higher yield in the form of:

Question

Quizplus · Accepted Answer

When investors are uncertain about the ability of the bond issuer to make payments as promised, they demand a higher yield in the form of an increased default risk premium. This compensates them for the added risk of default by the issuer. The other options are not directly related to default risk.

If Investors Are Uncertain That a Corporate Bond Issuer Will